Can Paula Deen Recover (And Who Really Pays If She Doesn't)?

In better times — just last year — Paula Deen promoted a new line of furniture. While Universal Furniture International said in July it will continue to market the Paula Deen Home Collection, several other endorsers have dropped Paula Deen products.

Grammy winning recording artist Beyonce launches her new "Heat" on Feb. 3, 2010, in New York City.

Jemal Countess
/ Getty Images

Originally published on August 15, 2013 12:10 pm

Paula Deen might have a hard time recovering.

The other day, a judge threw out charges of racial discrimination filed against the celebrity chef. That made sense, since the person suing Deen is white.

But consumers still know that she has used the N-word in the past and displayed racial insensitivity in other ways. That fact matters not only to Deen but to hundreds of people whose livelihoods have depended on her good fortune.

"While certainly she's hurt and her image is hurt, the people who work for her and cook for her are hurt more, there's no question about it," says Marla Royne Stafford, a marketing professor at the University of Memphis. "The people down the line are hurt more financially."

This is something that generally gets overlooked when people whose names are synonymous with a company run into trouble. Their careers may be in tatters, but it's the people who make and sell the products they've licensed that end up getting hurt.

"If General Motors lays off 10,000 people everybody talks about the ripple effect," says Bruce Clark, who teaches marketing at Northeastern University. "Martha Stewart goes to jail and everyone wonders how Martha is going to do in jail."

Person Or Product?

Celebrities have always lost endorsement deals when dogged with scandal. But now they can take entire businesses down with them.

There are fewer clear lines between celebrities who simply endorse products and those who own a chunk of the action.

"Celebrities are getting more involved in the process," says Christine Kowalcyzk, a professor of marketing and supply chain management at East Carolina University. "There's this blurring between what's an endorser and what's a brand."

Take Beyonce. The singer's Beyonce Heat perfumes are reportedly the best-selling celebrity fragrance line of all time. But it's not like Beyonce mixes up that stuff by herself.

"She came up with the actual scent, but she wasn't in her bathroom mixing ingredients and then building a manufacturing plant for that fragrance," says Samuel Doss, a marketing professor at the Florida Institute of Technology.

Still, it's unquestionably Beyonce's perfume. It's got her name on it. But what about Pepsi? She has a big endorsement deal with the soda maker but also helped design cans with her image on it.

"There's this celebrity-entrepreneur concept, where companies are not just paying them for use of their image," Kowalcyzk says. "Pepsi is going to retain most control, but there's a partnership."

Taking Down The Company

Beyonce has not run into any sort of scandal. But with celebrities closely associated with specific products — from George Foreman to Jessica Alba — there's always a risk that bad news in their personal lives could hurt sales.

"Celebrities are like a center of gravity," says Clark, the Northeastern professor. "They just draw all the attention in the news media."

That's why so many companies, including Walgreen's, Home Depot and Target, have gotten out of the business of selling Deen's cookware, tortilla chips and soups. Deen has lost not only her slot on the Food Network but millions of dollars' worth of endorsement deals.

"There's probably going to be other products that will be easily substitutable for a Paula Deen line," Doss says. "We can still buy Rachael Ray cookware or Bobby Flay."

Staging A Comeback

Like Deen's, Stewart's company lost a lot of business when she was found guilty of obstruction of justice, nearly a decade ago.

But Stewart served her time and has bounced back, with products bearing her name now on sale at Home Depot, Staples and Michaels. J.C. Penney and Macy's have been fighting in court over the right to sell her branded home goods.

When it comes to reclaiming their good names, celebrities have the chance to do something that faceless companies can't easily do: make public acts of contrition, such as sitting down with Oprah Winfrey or Jay Leno.

Often, their fans will be in a mood to forgive.

"You follow them on Twitter; you love them; they're part of your life in a surprisingly intimate way," Clark says.

Deen's Own Prospects For Success

Clark predicts that Deen can recover, at least among her hard-core fans. She's still got her restaurants in Savannah, Ga., books and Caribbean cruises scheduled for next year.

"If you love Paula Deen, you probably cut her some slack," Clark says. "There are people who are very upset about this, but they've probably never been in a Paula Deen restaurant."

But not everyone is so sure that Deen will ever again enjoy the kind of success she's had in the past. She appeared to stumble when the story of her past racially charged statements broke, releasing a series of apology videos and initially canceling an appearance on NBC's Today in June.

"There was a perception she was not sure what she was supposed to say," Kowalczyk says.

Celebrities can recover from many missteps, but there's never a guarantee that people will be willing to spend money supporting someone who has offended them.

"Society will recover from Paula Deen's comments and a year from now we will not remember what the incident was," Kowalzcyk says. "But we won't be buying her pots and pans."